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CA Technologies Reports First Quarter 2011 Results


News provided by

CA Technologies

Jul 21, 2010, 04:01 ET

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ISLANDIA, N.Y., July 21 /PRNewswire-FirstCall/ -- CA Technologies (Nasdaq: CA) today reported financial results for its first quarter ended June 30, 2010.

  • Revenue $1.091 Billion, Up 3 Percent in Constant Currency and 5 Percent as Reported
  • GAAP EPS $0.43, Up 7 Percent in Constant Currency and Up 16 Percent as Reported
  • Non-GAAP EPS $0.45, Down 1 Percent in Constant Currency and Flat as Reported
  • Reaffirms Revenue, Cash Flow 2011 Fiscal Year Outlook; Increases GAAP and non-GAAP EPS Guidance

FINANCIAL OVERVIEW




First Quarter FY11 vs. FY10


(in millions, except share data)


FY11

FY10

% Change

% Change CC**


Revenue


$1,091

$1,044

5%

3%


GAAP Income from Continuing Operations


$223

$195

14%

 5%


Non-GAAP Income from Continuing Operations*


$235

$245

(4%)

(5)%


GAAP Diluted EPS from Continuing Operations


$0.43

$0.37

16%

7%


Non-GAAP  Diluted EPS from Continuing Operations*


$0.45

$0.45

 0%

 (1%)


Cash Flow from Operations


$117

$262

(55%)

(55%)


*Non-GAAP income from continuing operations and earnings per share from continuing operations are non-GAAP financial measures, as noted in the discussion of non-GAAP results below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.

**CC: Constant Currency


EXECUTIVE COMMENTARY

"In fiscal 2011, our focus is on execution as we grow our core mainframe business and continue to build out our product platforms in virtualization management, service assurance, and identity and access management, which serve as on-ramps to emerging technologies in the cloud and software as a service," said Chief Executive Officer Bill McCracken. "First quarter revenue and earnings met our expectations and we will continue to make changes to the Company's operations to improve execution and accelerate the sale of new products.  We believe these actions will help us realize our long-term strategic and financial goals and further unlock shareholder value.

"Customer requirements drive our business model. During the first quarter we introduced more than 20 new products and invested in our CA World user conference, demonstrating  the power of our product portfolio to more than 5,000 customers and prospects," continued McCracken.  "In addition, to better align the Company with our target markets, we divested certain non-strategic products and created two new organizations – the Customer Solutions Group and the Technology and Development Group.  Working with our existing sales organization, the new organizations will drive collaboration and accountability across the Company, while enabling CA Technologies to deliver even greater customer service and product innovation."

FIRST QUARTER REVENUE AND BOOKINGS

Total revenue growth in the first quarter can be attributed primarily to increased execution of services engagements and revenue associated with the sale of software products obtained through the acquisition of NetQoS, Nimsoft and 3Tera. Bookings were down primarily due to a renewal portfolio that was only about one half of the portfolio available in the year ago period.  Weighted average contract duration was down due to lower scheduled contract renewals in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010 and a higher percentage of new product transactions that generally are for a shorter duration than renewals of existing contracts.  However, the decrease in duration contributed to current revenue backlog growth compared with the prior year period, which is an important indicator of future revenue levels.

  • Revenue was $1.091 billion, up 3 percent in constant currency and 5 percent as reported.
  • Total revenue backlog was $7.7 billion, up 2 percent in constant currency and flat as reported.  The current portion of revenue backlog was $3.4 billion, up 4 percent in constant currency and 2 percent as reported.
  • North America revenue was $666 million, up 6 percent in constant currency and 7 percent as reported.
  • International revenue was $425 million, down 1 percent in constant currency and up 1 percent as reported.
  • Total bookings in the first quarter were $750 million, down 36 percent in constant currency and 37 percent as reported primarily due to the above mentioned smaller renewal portfolio.
  • The Company signed six license agreements with aggregate values greater than $10 million for a total of $188 million, compared to 13 deals for a total of $634 million in the first quarter of fiscal year 2010. The first quarter of fiscal year 2010 included several contract extensions with terms greater than 4.5 years, four of which had a combined incremental value of approximately $465 million. The majority of these extensions were with managed services providers who traditionally extend contracts for longer than average lengths.
  • The weighted average duration of subscription and maintenance bookings for the quarter was 2.9 years, down from 4.2 years in the prior year period.
  • North America bookings were $459 million, down 40 percent in constant currency and as reported.
  • International bookings were $291 million, down 27 percent in constant currency and 31 percent as reported.

FIRST QUARTER EXPENSES AND MARGIN

Year-over-year GAAP results:

  • Operating expenses, before interest and income taxes, were $767 million, up 8 percent in constant currency and 7 percent as reported.
  • Operating income from continuing operations, before interest and income taxes, was $324 million, down 8 percent in constant currency and flat as reported.
  • Operating margin was 30 percent, down 1 percentage point.

Expenses, operating income from continuing operations, and operating margin for the first quarter were all unfavorably affected by increased costs associated with CA World—the Company's user conference—and additional costs associated with recently acquired businesses.

Year-over-year non-GAAP results:

  • Operating expenses, before interest and income taxes, were $724 million, up 8 percent in constant currency and 10 percent as reported.  
  • Operating income from continuing operations, before interest and income taxes, was $367 million, down 6 percent in constant currency and 5 percent as reported.
  • Operating margin was 34 percent, a decrease of 3 percentage points.

Non-GAAP results also were affected by the increased expenses described above.

In the first quarter, the Company reported a GAAP tax rate of 28 percent and a non-GAAP tax rate of 34 percent.

CASH FLOW FROM OPERATIONS

Cash flow from operations was $117 million compared to $262 million in the prior year. The first quarter of fiscal year 2010 included an upfront cash payment of more than $100 million associated with a large contract renewal. In addition, first quarter 2011 cash flow was affected by the increase in expenses.

CAPITAL STRUCTURE

  • Cash and cash equivalents were $2.476 billion.
  • With $1.558 billion in total debt outstanding, the Company's net cash position was $918 million.
  • The Company repurchased approximately 2 million shares of stock in the first quarter for a total of $40 million under the stock repurchase program authorized by the Board of Directors in May, 2010.  Between July 1, 2010 and July 20, 2010, the Company purchased an additional 1 million shares at a cost of $20 million.

BUSINESS HIGHLIGHTS

During the first quarter the Company announced:

  • The appointment of Arthur F. Weinbach as its non-executive chairman of the Board.
  • The appointment of two senior executives to further strengthen its management team: David C. Dobson, Executive Vice President and Group Executive, Customer Solutions Group, and Phillip J. Harrington, Jr., Executive Vice President, Risk and Chief Administrative Officer.
  • The divestiture of its non-strategic Information Governance business to Autonomy Corporation plc, a global leader in infrastructure software.
  • A new stock repurchase program that authorizes the Company to buy up to $500 million of its common stock.
  • The return of the Company to the Fortune 500.

OUTLOOK FOR FISCAL YEAR 2011

Beginning in the first quarter of fiscal year 2011, the Company is excluding share-based compensation expense from its non-GAAP financial measures. The following guidance, which represents "forward-looking statements" (as defined below), takes into account the exclusion of share-based compensation expense from future non-GAAP results. To enable fiscal year 2011 guidance for non-GAAP earnings per share from continuing operations to be compared to fiscal year 2010 full year results, the Company provides full fiscal year 2010 results for non-GAAP earnings per share from continuing operations excluding share-based compensation expense below.

The Company reaffirmed its outlook issued on May 13, 2010 for revenue and cash flow and increased guidance for GAAP and non-GAAP earnings per share from continuing operations. The Company also updated projected as reported numbers based on June 30, 2010 exchange rates:

  • Total revenue growth in a range of 3 percent to 5 percent in constant currency. At June 30, 2010 exchange rates, this translates to reported revenue of $4.4 billion to $4.5 billion;
  • GAAP diluted earnings per share growth in constant currency in a range of 5 percent to 13 percent, a two percentage point increase on the top end of previous guidance. At June 30, 2010 exchange rates, this translates to reported diluted earnings per share  of $1.51 to $1.63;
  • Non-GAAP diluted earnings per share growth in constant currency in a range of 7 percent to 14 percent, a two percentage point increase on the top end from pervious guidance. At June 30, 2010 exchange rates, this translates to reported non-GAAP diluted earnings per share of $1.82 to $1.94. Fiscal year 2010 non-GAAP diluted earnings per share from continuing operations was $1.74 excluding share-based compensation expense; and,
  • Cash flow from operations growth in a range of 2 percent to 7 percent in constant currency. At June 30, 2010 exchange rates, this translates to reported cash flow from operations of $1.38 billion to $1.45 billion.

This outlook also assumes no material acquisitions and a partial currency hedge of operating income. The Company also expects a full-year GAAP and non-GAAP tax rate in a range of 33 percent to 34 percent.

The Company anticipates approximately 510 million shares outstanding at fiscal year 2011 year-end, and a weighted average diluted shares outstanding of approximately 511 million for the fiscal year. Guidance does not include the impact from any future stock repurchases.

Webcast

This news release and the accompanying tables should be read in conjunction with additional content that is available on the Company's website, including a supplemental financial package, as well as a webcast that the Company will host at 5 p.m. ET today to discuss its unaudited first quarter results. The webcast will be archived on the website. Individuals can access the webcast, as well as this press release and supplemental financial information, at http://ca.com/invest or listen to the call at 1-877- 545-1407. The international participant number is 1-719-325-4895.

(Logo:  http://photos.prnewswire.com/prnh/20100516/NY05617LOGO )

(Logo:  http://www.newscom.com/cgi-bin/prnh/20100516/NY05617LOGO )

About CA Technologies

CA Technologies (NASDAQ: CA) is an IT management software and solutions company with expertise across all IT environments – from mainframe and distributed, to virtual and cloud. CA Technologies manages and secures IT environments and enables customers to deliver more flexible IT services. CA Technologies innovative products and services provide the insight and control essential for IT organizations to power business agility. The majority of the Global Fortune 500 relies on CA Technologies to manage evolving IT ecosystems. For additional information, visit CA Technologies at www.ca.com.

Follow CA Technologies

  • CA Social Media Page
  • CA Newsletters
  • CA Press Releases
  • CA Podcasts

Non-GAAP Financial Measures  

This news release, the accompanying tables and the additional content that is available on the Company's website, including a supplemental financial package, includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP). Non-GAAP metrics for operating expenses, operating income from continuing operations, operating margin, income from continuing operations and diluted earnings per share from continuing operations exclude the following items: non-cash amortization of purchased software and other intangibles, share-based compensation, pre-fiscal year 2010 restructuring and other charges and include the gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter. Non-GAAP income from continuing operations also excludes the interest on convertible bonds. The effective tax rate on GAAP and non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of pre-tax GAAP and non-GAAP income from continuing operations, respectively. Such tax rates are determined based on an estimated effective full year tax rate, with the effective tax rate for GAAP generally including the impact of discrete items in the period such items arise and the effective tax rate for non-GAAP income from continuing operations generally allocating the impact of discrete items pro rata to the fiscal year's remaining reporting periods. Non-GAAP adjusted cash flow excludes restructuring and other payments. Free cash flow excludes capital expenditures. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations.  To present this information, current and comparative prior period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate in effect on March 31,  2010, which was the last day of our prior fiscal year.  Constant currency excludes the impacts from the Company's hedging program.  The constant currency calculation for annualized subscription and maintenance bookings is calculated by dividing the subscription and maintenance bookings in constant currency by the weighted average subscription and maintenance duration in years. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and cash flows, to competitors' operating results and cash flows, and to estimates made by securities analysts. Management uses these non-GAAP financial measures internally to evaluate its performance and they are key variables in determining management incentive compensation. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. In addition, the Company has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures, which are attached to this news release.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this communication (such as statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) constitute "forward-looking statements" that are based upon the beliefs of, and assumptions made by, the Company's management, as well as information currently available to management. These forward-looking statements reflect the Company's current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company's strategy by, among other things, increasing sales in new and emerging enterprises and markets, enabling the sales force to sell new products and Software-as-a-Service offerings and improving the Company's brand in the marketplace; global economic factors or political events beyond the Company's control; general economic conditions, including concerns regarding a global recession and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; failure to expand channel partner programs; the ability to adequately manage and evolve financial reporting and managerial systems and processes; the ability to successfully acquire technology and software that are consistent with our strategy and integrate acquired companies and products into existing businesses; competition in product and service offerings and pricing; the ability to retain and attract qualified key personnel; the ability to adapt to rapid technological and market changes; the ability of the Company's products to remain compatible with ever-changing operating environments; access to software licensed from third parties, third-party code and specifications for the development of code; use of software from open source code sources; discovery of errors in the Company's software and potential product liability claims; significant amounts of debt and possible future credit rating changes; the failure to protect the Company's intellectual property rights and source code; fluctuations in the number, terms and duration of our license agreements as well as the timing of orders from customers and channel partners; reliance upon large transactions with customers; risks associated with sales to government customers; breaches of the Company's software products and the Company's and customers' data centers and IT environments; access to third-party microcode; third-party claims of intellectual property infringement or royalty payments; fluctuations in foreign currencies; failure to successfully execute restructuring plans; successful outsourcing of various functions to third parties; potential tax liabilities; and these factors and the other factors described more fully in the Company's filings with the Securities and Exchange Commission.  The Company assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Copyright © 2010 CA, Inc. All Rights Reserved. One CA Plaza, Islandia, N.Y. 11749. All other trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

Contacts:

Dan Kaferle

Kelsey Doherty


Public Relations

Investor Relations


(631) 342-2111

(212) 415-6844


[email protected]

[email protected]

Table 1

CA Technologies

Condensed Consolidated Statements of Operations

(in millions, except per share amounts)

(unaudited)








Three Months Ended

June 30,




Revenue

2010


2009


Subscription and maintenance revenue

$  961


$             941


Professional services

78


70


Software fees and other

52


33


Total revenue

1,091


1,044


Expenses





Costs of licensing and maintenance

77


66


Cost of professional services

71


66


Amortization of capitalized software costs

45


33


Selling and marketing

299


280


General and administrative

117


110


Product development and enhancements

128


117


Depreciation and amortization of other intangible assets

44


38


Other (gains) expenses, net

(11)


7


Restructuring and other

(3)


2


Total expenses before interest and income taxes

767


719


Income from continuing operations before interest and income taxes

324


325


Interest expense, net

13


17


Income from continuing operations before income taxes

311


308


Income tax expense

88


113


INCOME FROM CONTINUING OPERATIONS

223


195


Loss from discontinued operations, net of income taxes

6


-



NET INCOME

$  217


$             195







Basic income (loss) per share





Income from continuing operations

$ 0.43


$            0.37


Loss from discontinued operations

(0.01)


-


Net Income

$ 0.42


$            0.37


Basic weighted average shares used in computation

510


516







Diluted income (loss) per share





Income from continuing operations

$ 0.43


$            0.37


Loss from discontinued operations

(0.01)


-


Net Income

$ 0.42


$            0.37


Diluted weighted average shares used in computation

511


540







Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.


Table 2

CA Technologies

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)












June 30,


March 31,



2010


2010







Cash and cash equivalents

$  2,476


$          2,583


Trade and installment accounts receivable, net      

638


931


Deferred income taxes - current

260


360


Other current assets

219


116







Total current assets

3,593


3,990


Installment accounts receivable, due after one year, net

-


46


Property and equipment, net

438


452


Goodwill

5,567


5,667


Capitalized software and other intangible assets, net

1,190


1,150


Deferred income taxes - noncurrent

313


355


Other noncurrent assets, net

190


178







Total assets

$11,291


$        11,838







Current portion of long-term debt and loans payable

$       15


$               15


Deferred revenue (billed or collected) - current

2,276


2,555


Deferred income taxes - current

47


51


Other current liabilities

700


967







Total current liabilities

3,038


3,588







Long-term debt, net of current portion

1,543


1,530


Deferred income taxes - noncurrent

133


134


Deferred revenue (billed or collected) - noncurrent

962


1,068


Other noncurrent liabilities

513


535







Total liabilities

6,189


6,855







Common stock

59


59


Additional paid-in capital

3,577


3,657


Retained earnings

3,557


3,361


Accumulated other comprehensive loss

(163)


(130)


Treasury stock

(1,928)


(1,964)







Total stockholders’ equity

5,102


4,983







Total liabilities and stockholders’ equity

$11,291


$        11,838

Table 3

CA Technologies

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)



Three Months Ended



June 30,



2010


2009


OPERATING ACTIVITIES:





       Net income

$   217


$   195


       Adjustments to reconcile net income to net cash
        provided by operating activities:





Depreciation and amortization

89


73


Provision for deferred income taxes

116


6


Provision for bad debt

3


-


Share based compensation expense

19


27


Amortization of discount on convertible debt

-


8


Asset impairments and other non-cash charges

5


1


Foreign currency transaction gains

(2)


-


       Changes in other operating assets and liabilities, net
        of effect of acquisitions:            





Decrease in trade and installment accounts receivable, net  

326


239


Decrease in deferred revenue

(310)


(94)


Decrease in taxes payable, net

(191)


(75)


Decrease in accounts payable, accrued expenses and other

(4)


(14)


Decrease in accrued salaries, wages and commissions

(105)


(63)


Decrease in restructuring liabilities

(34)


(19)


Changes in other operating assets and liabilities

(12)


(22)


NET CASH PROVIDED BY OPERATING ACTIVITIES

117


262


INVESTING ACTIVITIES:





        Acquisitions, primarily businesses, net of cash acquired,





        and purchased software

(9)


(3)


        Purchases of property and equipment

(25)


(25)


        Cash proceeds from divestiture of assets

16


-


        Capitalized software development costs

(42)


(37)


        Other investing activities

(16)


(2)


NET CASH USED IN INVESTING ACTIVITIES

(76)


(67)


FINANCING ACTIVITIES:





        Dividends paid

(21)


(21)


        Purchases of common stock

(55)


-


        Debt repayments

(3)


(1)


        Exercise of common stock options and other

4


-


NET CASH USED IN FINANCING ACTIVITIES

(75)


(22)


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS BEFORE





   EFFECT OF EXCHANGE RATE CHANGES ON CASH

(34)


173


Effect of exchange rate changes on cash

(73)


93


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(107)


266


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

2,583


2,712


CASH AND CASH EQUIVALENTS AT END OF PERIOD

$2,476


$2,978

Table 4

CA Technologies

Constant Currency Summary

(in millions)

(unaudited)



Three Months Ended June 30,



2010


2009


% Increase (Decrease) in $ US


% Increase (Decrease) in Constant Currency (1)











Bookings

$    750


$ 1,192


(37%)


(36%)











Revenue:









  North America

$    666


$    625


7%


6%


  International

425


419


1%


(1%)


  Total revenue

$ 1,091


$ 1,044


5%


3%











Revenue:









  Subscription and maintenance

$    961


$    941


2%


1%


  Professional services

78


70


11%


11%


  Software fees and other

52


33


58%


51%


  Total revenue

$ 1,091


$ 1,044


5%


3%











Total expenses before interest and
income taxes:









  Total Non-GAAP (2)

$    724


$    657


10%


8%


  Total GAAP

$    767


$    719


7%


8%




























(1)  Constant currency information is presented to provide a framework to assess how the underlying businesses performed excluding the effect of foreign currency rate fluctuations.  To present this information, current and comparative prior period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate in effect on March 31, 2010, which was the last day of fiscal year 2010.  Constant currency excludes the impacts from the Company's hedging program.      

(2)  Refer to Table 6 for a reconciliation of total expenses before interest and income taxes on a GAAP basis to total expenses before interest and income taxes on a non-GAAP basis.  


 Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  

Table 5

CA Technologies

Reconciliation of GAAP Results to Non-GAAP Net Income

(in millions, except per share amounts)

(unaudited)



Three Months Ended



June 30,



2010


2009







Total revenue

$ 1,091


$ 1,044


Total expenses before interest and income taxes

767


719







Income from continuing operations before interest and





   income taxes (1)

324


325


   GAAP Operating Margin (% of revenue)

30%


31%







Non-GAAP operating adjustments:





  Purchased software amortization

22


13


  Intangibles amortization

16


13


  Share-based compensation

19


27


  Restructuring and other (2)

-


2


  Hedging (gains)/losses, net (3)

(14)


7


Total non-GAAP operating adjustments                            

43


62


Non-GAAP income from continuing operations before





   interest and income taxes

367


387


   Non-GAAP Operating Margin (% of revenue)

34%


37%







Interest expense, net

13


17


Interest on dilutive convertible bonds

-


(10)


Non-GAAP income from continuing operations before





   income taxes

354


380







Income tax expense (4)

119


135







Non-GAAP income from continuing operations (5)

$    235


$    245







Non-GAAP diluted EPS from continuing operations (5)(6)

$   0.45


$   0.45


Diluted weighted average shares used in





    computation (6)

511


540
















(1)  See the Condensed Consolidated Statements of Operations on Table 1 for a bridge from income from continuing operations before interest and income taxes to income from continuing operations.  

(2)  Excludes $3 of benefit related to the Fiscal 2010 restructuring plan for the three months ended June 30, 2010.  

(3)  Consists of gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter.  

(4)  The effective tax rate on non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of non-GAAP income from continuing operations before income taxes.  Such tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).  

(5)  Non-GAAP income from continuing operations and the number of shares used in the computation of non-GAAP diluted EPS from continuing operations have been adjusted to reflect the dilutive impact of the Company’s 1.625% Convertible Senior Notes and stock awards outstanding for the period ending June 30, 2009.  

(6)  The calculation of the non-GAAP diluted EPS from continuing operations includes certain adjustments required by ASC 260-10-45 which treats certain stock awards as participating securities for the computation of earnings per share.  As a result, non-GAAP diluted EPS from continuing operations may not equal the non-GAAP income from continuing operations divided by the diluted weighted average shares.    

 Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.  

 Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  

Table 6

CA Technologies

Reconciliation of GAAP to Non-GAAP

Operating Expenses and Diluted Earnings per Share

(in millions)

(unaudited)



Three Months Ended



June 30,


Operating Expenses

2010


2009







Total expenses before interest and income taxes

$ 767


$ 719







Non-GAAP operating adjustments:





  Purchased software amortization

22


13


  Intangibles amortization

16


13


  Share-based compensation

19


27


  Restructuring and other

-


2


  Hedging (gains)/losses, net (1)

(14)


7


Total non-GAAP operating adjustments                            

43


62







Total non-GAAP operating expenses

$ 724


$ 657













Three Months Ended



June 30,


Diluted EPS from Continuing Operations

2010


2009







GAAP diluted EPS from continuing operations

$0.43


$0.37







Non-GAAP adjustments, net of taxes  





 Purchased software and intangibles amortization

0.05


0.03


 Share-based compensation

0.02


0.03


 Restructuring and other

-


-


 Hedging (gains)/losses, net (1)

(0.02)


0.01


 Non-GAAP effective tax rate adjustments (2)

(0.03)


0.01







Non-GAAP diluted EPS from continuing operations

$0.45


$0.45











(1)  Consists of gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter.  


(2)  The effective tax rate on non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of non-GAAP income from continuing operations before income taxes.  Such tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).  

 Refer to the discussion of Non-GAAP financial measures included in the accompanying press release for additional information.  

 Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  

Table 7

CA Technologies

Effective Tax Rate Reconciliation

GAAP and Non-GAAP

(in millions)

(unaudited)



Three Months Ended



June 30, 2010



GAAP


Non-GAAP







Income from continuing operations before income taxes (1)

$ 311


$        354







Statutory tax rate

35%


35%







Tax at statutory rate

109


124







Adjustments for discrete and permanent items (2)

(21)


(5)







Total tax expense                            

$   88


$        119







Effective tax rate (3)

28.3%


33.5%











(1)  Refer to Table 5 for a reconciliation of income from continuing operations before interest and income taxes on a GAAP basis to income from continuing operations before income taxes on a non-GAAP basis.  


(2)  The effective tax rate for GAAP generally includes the impact of discrete and permanent items in the period such items arise, whereas the effective tax rate for non-GAAP generally allocates the impact of such items pro rata to the fiscal year's remaining reporting periods.  


(3)  The effective tax rate on GAAP and non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of GAAP and non-GAAP income from continuing operations before income taxes, respectively.  Such tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).  


 Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.  


 Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  

Table 8

CA Technologies

Reconciliation of Projected GAAP Earnings per Share to

Projected Non-GAAP Earnings per Share

(unaudited)


Fiscal Year Ending


March 31, 2011









Projected GAAP Diluted EPS From Continuing Operations Range  

$1.51

to

$1.63





Non-GAAP Adjustments, Net of Taxes:




    Purchased Software and Intangibles Amortization

0.19


0.19

    Share-based Compensation

0.12


0.12





Non-GAAP Projected Diluted Operating EPS From Continuing Operations Range

$1.82

to

$1.94

























Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.

SOURCE CA Technologies

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